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D.C. Court of Appeals Strikes Down EPA's Stay of Key Parts of Quad Oa -- the 2016 Methane NSPS Rule for the Oil and Gas Industry.

The June 3, 2017 deadline for certain sources to conduct initial monitoring surveys to identify fugitive leaks remains in effect for now.

On June 3, 2016, the United States Environmental Protection Agency (EPA) issued a final rule entitled "Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources" which amended and established updated new source performance standards (NSPS) for facilities in the oil and natural gas sector constructed, modified or reconstructed after September 18, 2015. The final rule was published in the Federal Register at 81 Fed. Reg. 35824 with an effective date of August 2, 2016 and codified in EPA's NSPS regulations as Subpart OOOOa to 40 CFR Part 60 or "Quad Oa."

Among other provisions, the final rule addressed fugitive emissions at well sites, compressor station sites, emissions from pneumatic pumps and required regulated entities to conduct an initial monitoring survey to identify fugitive leaks by June 3, 2017. In August 2016, after the rule was final, several administrative petitions for review of the Quad Oa regulation, including a request for a stay, were filed by industry groups. The fugitive emissions monitoring requirements, the standards for pneumatic wells at compressor sites and a professional engineer certification for certain sites were key provisions of the regulation included in the petitions for review.

On March 28, 2017, President Trump issued an Executive Order on Promoting Energy Independence and Economic Growth (Climate Change Executive Order), which specifically called for EPA to review Quad Oa in connection with a mandate for agencies to review any regulations that "potentially burden the safe, efficient development of domestic energy sources." On April 18, 2017, EPA Administrator Scott Pruitt announced by letter that EPA would be convening regulatory proceedings to reconsider Quad Oa. including the fugitive emissions monitoring requirement, the standards for pneumatic wells at compressor sites and the professional engineer certification, which would include a 90-day stay under EPA's authority under Section 307 of the Clean Air Act (42 USC 7607)(CAA). Section 307 allows for reconsideration of a final rule if the EPA Administrator finds that the petitioner raises an objection to a rule that was impracticable to raise during the comment period or if the grounds for the objection arose after the comment period but within the period for judicial review. In either case, the Administrator must also conclude that the objection is of central relevance to the outcome of the rule. The Administrator may stay the effectiveness of the rule for up to three months during such reconsideration.

On June 5, 2017, EPA published a notice in the Federal Register (82 Fed. Reg. 25731) stating that it was issuing the three-month stay of the fugitive emissions requirements, the standards for pneumatic pumps at well sites, and the certification by a professional engineer requirements. Several environmental non-governmental organizations (NGOs) immediately filed suit in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit).

Thereafter, on July 3, 2017, the D.C. Circuit issued an opinion striking down the three-month stay of the fugitive emissions monitoring requirements, the standards for pneumatic pumps at well sites, and the certification by a professional engineer requirements, stating, among other reasons, that EPA exceeded its authority under Section 307 of the CAA and that the issues were adequately raised during the comment period.

While the judicial litigation was proceeding, on June 16, 2017 (presumably in response to the NGO's lawsuit that the three-month stay was improper), EPA issued a notice of proposed rulemaking (NPRM), requesting a two-year stay of the same requirements for fugitive emissions, the standards for pneumatic pumps at well sites, and the certification by a professional engineer to allow EPA to review Quad Oa in connection with the administrative petitions mentioned above. A public hearing was held on the NPRM on July 10, 2017 and the comment period now extends until August 8, 2017. Notably, this proposed stay does not appear to apply to Quad Oa's well-completion control requirements and emission requirements related to storage vessels, among other requirements, meaning that these regulatory requirements will still be in effect, even if EPA's NPRM is finalized and (if challenged) upheld in court.

Conclusion The D.C. Circuit's striking down EPA's three-month stay of fugitive emissions requirements, the standards for pneumatic pumps at well sites, and the certification by a professional engineer requirements was one of the first tests case for EPA's and other agencies' efforts to implement the Climate Change Executive Order. Since EPA's proposed stay of certain aspects of the Quad Oa rule were invalidated, this will likely require EPA and other agencies to seek other avenues for implementing the Executive Order. More importantly, this also means that the June 3, 2017 deadline for facilities constructed, modified or reconstructed after September 18, 2015 to conduct the initial fugitive emissions leak detection surveys is still in effect, at least for now. It remains to be seen what the outcome or timing of the NPRM will be.

How can GHD help?Our environmental specialists can assist with conducting an initial monitoring survey to identify fugitive emissions at well sites, compressor station sites, and from pneumatic pumps, and work with you to develop comprehensive solutions for managing any leaks.